US farm markets captured once again big gains yesterday.
Operators, indeed, still focused on some bullish news that includes dry South American weather forecasts and solid export demand.
Thus, corn prices rose 0.71%.
Soybeans grabbed double-digit gains and moved 1.59% higher.
Soymeal prices were another 1.98% to 2.23% higher with May having closed above $400/ton.
The May ‘22 contracts’ high from May earlier this year was $423/ton.
Soybean oil futures also firmed 1.6% to 1.73% on the day.
Finally, winter wheat prices also found solid gains ranging from 1.46% in Kansas to 1.88% in Chicago, while in Minneapolis spring wheat prices were relatively flat as were up only 0.22% higher.
In energy markets, oil prices edged up on this morning for a third consecutive session over positive developments around COVID-19, even as China imposed new travel curbs and Australia reinstated restrictions to combat surging cases.
Thus, U.S. West Texas Intermediate (WTI) crude futures rose 10 cents, or 0.1%, to $72.86 a barrel at 06:25 GMT after jumping 2.3% in the previous session.
Brent crude futures also gained 8 cents, or 0.1%, to $75.37 a barrel, extending a 1.8% gain in the previous session.
On the freight market, the Baltic Exchange’s dry bulk sea freight index declined on Wednesday, pressured by lower rates across the capesize vessel segment, recording its lowest level since June.
The overall index, which factors in rates for capesize, panamax and supramax vessels, lost 65 points, or 2.8%, to 2,229, its lowest since April 14.
Rates for the vessels have further eroded into the current week ahead of the holidays, shipbroker Intermodal said in a weekly note dated Tuesday.
The capesize index fell 208 points, or 7.8%, to its lowest since June 8 at 2,455.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $1,725 to $20,363.
The panamax index added 73 points, or 3.2%, to 2,384, ending a 10-session losing streak.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, increased by $664 to $21,460.
The supramax index shed 46 points to its lowest in over three weeks at 2,337.
On equities markets, US stock indexes yesterday settled moderately higher on speculation the omicron Covid variant won’t derail the economic recovery.
A larger-than-expected increase in U.S. Dec consumer confidence also was a supportive factor for stocks.
Wednesday’s U.S. economic data, indeed, was mixed for stocks.
However, on the positive side, U.S. Q3 GDP was unexpectedly revised upward to 2.3% (q/q annualized) from 2.1% as Q3 personal consumption was revised upward to 2.0% from 1.7%.
Also, the Conference Board’s Dec U.S. consumer confidence index rose +3.9 to a 5-month high of 115.8, stronger than expectations for an increase to 111.0.
On the negative side, in contrast, U.S. Nov existing home sales rose +1.9% m/m to 6.46 million, weaker than expectations for an increase to 6.53 million.
Also, the Nov Chicago Fed national activity index fell -0.38 to 0.37, weaker than expectations of 0.50.
In this context, on Wall Street the S&P 500 rose 1% to 4,696.56, the Nasdaq rose 1.2% to 15,521.89 and the Dow Jones Industrial Average rose 0.7% to 35,753.89.
The Russell 2000, a measure of small-company stocks, rose 0.9% to 2,221.90.
Meantime, Asian shares were higher too on this morning.
In fact, Tokyo’s Nikkei 225 gained 0.8% to 28,798.37. In Hong Kong, the Hang Seng edged 0.4% higher to 23,186.55.
The Shanghai Composite index picked up 0.5% to 3,639.12.
South Korea’s Kospi climbed 0.4% to 2,997.11, while the S&P/ASX 200 advanced 0.3% to 7,387.60.
Shares also rose in Taiwan and Thailand.
On the weather side, some more rain and snow will develop across the Northern Plains and upper Midwest between today and Sunday, while areas farther south will see no measurable moisture during that time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally cold weather spreading across the Plains and western Corn Belt between December 29 and January 4, with wetter-than-normal conditions likely for most of the country next week.
Meantime, there are some concerns on winter wheat crops as are currently suffering dryness of past weeks.
On the demand side, yesterday EIA reported ethanol producers averaged 1.051m barrels per day during the week that ended 12/17.
That marks the 11th straight week that daily production has topped 1 million barrels.
However, that was down another 36k bpd form the week prior and was a 3-wk low.
Production was up 7.7% from year-ago, but still 3.0% lower than the same seek in 2019 (pre-pandemic).
At the same time, ethanol stocks were reported 178k barrels lighter at 20.705 million.
Note ethanol stocks tracked lower for the first time in five weeks.
US export sales will be watched closely later on this morning; recent pace has been impressive so the test will be if the US can still sell wheat post a 50c/bu rally.
Particularly, ahead of USDA’s next export report, out tomorrow morning and covering the week through December 16, analysts expect the agency to show corn sales ranging between 725k and 1.4 MMT.
New crop sales are expected at less than 50k MT.
As for soybean, analysts think the agency will show soybean sales ranging between 0.7 and 1.7 MMT.
Analysts also expect to see soymeal sales ranging between 50,000 and 250,000 metric tons, plus another 50,000 MT to 75,000 MT of soyoil sales.
As for wheat, analysts expect the agency to show wheat sales ranging between 200,000 and 550,000 MT.
US HRW basis markets are high, and it seems the US transport market is a major contributor to the strength.
This dislocation in the transport market suggests the US could be better off importing Argentinian wheat rather than trying to move domestic HRW.
Meantime, the United States Trade Representative Katherine Tai reported restrictive import policies and practices from Russia to Congress, suggesting such procedures were in violation of WTO.
USTR also said the U.S. will use appropriate means to resolve the issues attempting to keep Russian markets open for U.S. exports.
While wheat was not specifically named USTR said, ‘ “non-science based import restrictions” affect the ag sector’.
In this context, corn basis bids were steady to weak after falling 2 to 6 cents lower at four separate Midwestern facilities.
Soybean basis bids trended 3 to 5 cents lower at two Midwestern locations, while holding steady elsewhere across the central U.S..
The funds were net buyers yesterday for 5,000 lots of corn, 12,000 lots of soybeans and 6,000 lots of wheat.
From South America, weather forecast for southern Brazil and Argentina still does not show precipitation for the next few days, with temperatures rising sharply, especially over Argentina.
This mainly supports soybeans and corn, while for wheat, it is the crop ratings of American winter wheats that are supporting prices.
Meantime, according to the Argentinian Ministry of Agriculture, the country has exported 36.3 million tonnes of soybeans since the start of the campaign against 37.0 million last year.
On European market, Euronext confirmed its recent rebound on Wednesday evening, benefiting also from a new jump in crude prices.
This strengthening of energy prices thus pushes all the raw materials used in the biofuel industry upwards.
Rapeseed prices, indeed, keep breaking new records, despite the current global health context.
Also,the price of oilseeds has been supported for two days by new price records for gas , which further increases the prices of nitrogenous fertilizers when these are available.
For wheat, rumors of export quotas from Ukraine were an additional support into a picture where international demand seems not have a stops.
Particularly, it is the millers who are asking Ukraine for a limitation of exports, while the association of grain producers is opposed to it.
Meantime, the German statistics agency sees winter wheat areas for Germany at 2.87 million hectares up + 0.4% compared to last year, and rapeseed areas up + 8.7% to 1.08 million hectares.
Meantime, non-commercial market participants last week reduced their net long position in Euronext’s milling wheat futures and options for a second straight week, cutting their net long position to 167,029 contracts in the week to Dec. 17 from 181,779 a week earlier, the data showed.
Commercial participants, meantime, lowered their net short position to 184,648 contracts from 202,729 a week earlier.
Commercials’ short positions accounted for 65.9% of the total short position, while commercial long positions accounted for 38.2% of total long positions.
Non-commercial short positions represented 34.1% of total short positions, while non-commercial net long positions accounted for 61.8% of the total longs.
In Euronext’s rapeseed futures and options, non-commercial market participants had a net short position of 25 contracts compared with a net long of 870 a week earlier.
Commercial participants reduced their net short position in rapeseed to 77 contracts from 665 a week earlier.
From North Africa, Egypt’s Suez Canal economic zone said in a statement on Wednesday that a Serbian agriculture ministry delegation had indicated that the country wanted to establish wheat storage silos inside the zone.
It added that the Serbian silos would be a distribution centre for the Middle East, Africa and West Asia.
From the Black Sea basin, wheat prices are rising, in the wake of other markets, while export activity is slowing down a bit at this end of the year period.
As we said, Ukraine might decide in mid-January to limit milling wheat exports for the rest of the 2021-22 marketing year to protect domestic supplies and keep prices from rising.
They indicated milling-quality wheat shipments could be limited to 4 MMT through June.
The current quota sets 2021-22 wheat exports at 25.3 MMT, without differentiating between feed or milling quantities.
The country has already exported 15.6 MMT of wheat up 27% from last year.
Ukraine’s flour makers association recently told the government a milling wheat shortage could significantly affect the country’s flour and flour products.
Thus, the millers in Ukraine are asking that wheat exports be limited in the second part of the season, which the association of producers is refusing for the moment.
Indeed, according to Ukrainian Grain Association, Ukraine harvested record volume of wheat – almost 33 mmt and plans to export 25,3 mmt of wheat (as agreed in Memorandum between Ministry and market players).
Thus, Ukraine Ministry of Agripolicy doesn’t plan any restrictions on grains export including wheat export the Association said.
Corn prices in Ukraine are rising amid climate fears on the South American continent.
On the weather side, temperatures are displayed at -14 degrees in Moscow at 6 a.m., -12 degrees in Kiev and -6 degrees in Krasnodar.
From Saudi Arabia, Saudi’s state grains buyer SAGO said on Thursday it has approved an exceptional increase in its local wheat procurement price of 100 riyals ($26.63) per tonne.
SAGO had set a price of 1,440 riyals per tonne and the change comes as the state “seeks to empower licensed wheat farmers in light of recent developments in global prices and an increase in the cost of their inputs.”
($1 = 3.7546 riyals).
From South East Asia, USDA’s Ag Attache estimates Malaysia’s 2021 biodiesel production is expected to drop by 16% at 1.05 billion L, as exports are negatively impacted by the price of CPO at an all time high throughout 2021 and the Covid 19 pandemic not only affected biodiesel consumption, but also delayed the implementation of a B20 mandate.
Indeed, the B20 mandate has been further delayed to now mid-2022, though the Government of Malaysia said the hard date may be further delayed.
The attache expects biodiesel exports to total 315m L, which would also be 23.5% lower yr/yr, compared to the previous year’s 412 million liters.
Meantime, Malaysian Palm Prices were 4,931 ringgits as of 12/22, that is still down from the record 5,200+ quotes in Mid Nov, but back up from 12/15’s 4,655 low.
With no domestic feedstock industry to support it, Malaysia has no fuel ethanol program, despite associated human health and climate benefits.
From Philippines, USDA’s attache increased the MY 21/22 estimate for milled rice production to 12.5 million MT on positive first-quarter production data while holding imports unchanged.
Meanwhile, poor results in corn production lead USDA attache to slash the production outlook to 7.5 million MT and expand imports to a would-be record 1.2 million MT in order to satisfy current demand.
Finally, USDA’s attache to lower wheat imports to 6.3 million MT as both demand for hog feed remains soft and higher-priced consumer wheat products begin to hit the shelves.
From Australia, local markets showed some life yesterday locally, with cashboards firming up on wheat, and protein wheat catching a bid and finishing the day at A$10-$12/t higher
South Australia gained momentum over the day, with the Port Lincoln APW1 track bid up to $400/t again.
Lots of questions exist about Australia’s ability to set Iraq on wheat, and quality out of Australia is the big question.
Given Iraq’s requirements for a mix of H2 and APW, there will be some trepidation on adding to the existing protein shorts.
With ample availability this would price out of Australia, but this year, it is not so simple
Meantime, lower-grade wheat along in eastern states also firmed $5-6/t on the cashboards.
Barley followed suit, and was also stronger on the bid by $4-$5/t, while canola also found some ground although there was little activity from growers who have shut up shop for now.
The pulse market pulse has stopped, with bids pulling back and buyers comfortable with short-term coverage levels for now.
Domestic consumers are now kicking around on the bid side for faba beans as it now works back into the ration at around $450/t in Victoria.
On international trade scene, Algeria concluded its latest tender with the purchase of 240 kt of durum wheat with February loading, probably of Mexican and Canadian origin.
The Taiwan Flour Millers’ Association purchased an estimated 110,000 tonnes of milling wheat to be sourced from the United States in a tender which closed on Thursday.
The wheat was bought in two consignments comprising various wheat types for shipment from the U.S. Pacific Northwest coast in February 2022.
The first consignment, for shipment between Feb. 1-15, involved 32,470 tonnes of U.S. dark northern spring wheat of 14.5% protein content bought at $448.18 a tonne on a free-on-board (FOB) basis from the U.S. Pacific Northwest coast.
The purchase also involved 16,955 tonnes of hard red winter wheat of 12.5% protein bought at $430.19 a tonne FOB, and 5,575 tonnes of soft white wheat of 10.5% protein bought at $437.61 a tonne FOB.
The first consignment has an additional freight charge of $49.25 per tonne for ocean shipping from the U.S. Pacific Northwest coast to Taiwan.
Trading house CHS was believed to be the seller of the dark northern spring and soft white wheat in the first consignment, while ADM sold the hard red winter.
The second consignment, for shipment between Feb. 8-22, involved 30,705 tonnes of dark northern spring wheat of 14.5% protein content bought at $437.32 a tonne FOB from the U.S. Pacific Northwest coast.
It also included 17,935 tonnes of hard red winter wheat of 12.5% protein content bought at $425.10 a tonne FOB and 6,360 tonnes of soft white wheat of 10.5% protein bought at $421.75 a tonne FOB.
The second consignment has an additional freight charge of $49.62 per tonne for ocean shipping from the U.S. Pacific Northwest coast to Taiwan, they said.
The seller of the dark northern spring and soft white wheat in the second consignment was believed to be trading house United Grain while Columbia Grain International sold the hard red winter.
Author: Sandro F. Puglisi
